US Economy – Surprisingly Resilient or Potemkin Village? From Michael Hudson

There’s a lot not to like about the U.S. economy. from Michael Hudson at unz.com:

For today’s episode, we want to talk about what’s going on in the US economy. Because when you look at the discussion that’s going on, you see a lot of contradictory narratives. On the one hand, you have people like Bank of America’s CEO Brian Moynihan, who said on Sunday that the country may face a mild recession later this year. You see a lot of major CEOs making similar predictions. By contrast, the Biden administration and much of the US mainstream media are insisting that the US economy is showing extraordinary resilience. So, Michael, I want to ask you, what is your analysis on the current state of the US economy?

It looks very bad. It never really recovered from the Obama depression that begun in 2009 when the banks were bailed out and all of the debts were kept on the book. The debt has been growing very rapidly because of the Federal Reserve’s 14 years of zero interest rates that flooded the economy with money, which means debt, to try to prop up the stock market and the real estate market. The debt has grown much higher than it was way back in 2008, when you had the junk mortgage crisis. The arrears and defaults are rising for student loans, for automobile loans, for credit card loans. Commercial property is not only defaulting, but large companies are simply walking away from their office buildings. Many banks are in the same position that Silicon Valley Bank was in. There’s almost a negative equity because the mortgage holdings and their long-term bond holdings market value has gone way down below what they owe their depositors. As long as depositors don’t take their money out, banks don’t have to report how much they’ve lost and how much their acquisition price of mortgages and stocks exceeds the actual market price today. But Americans are pulling their money out of banks because banks don’t pay very much interest. When you have the government paying 4 to 5% on your money, why would you leave your money in banks that are paying maybe 0.2%? But as banks try to prevent the withdrawals, they’re raising the rates they pay depositors and all of a sudden their earnings are way down. So the economy is being squeezed financially.

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